Posted: Wed May 07, 2008 10:30 pm Post subject: Re: Oil and gold prices plunging
smallpoxgirl wrote:
Yeah that'd be great if I hadn't already sunk so much cash into physical metals. I'd pay a big premium to get liquid at this point. This was the first time I've had any money to invest, and I'm kind of taking a beating. Bad timing.
I think I should just hold tight, but it sure doesn't make me happy watching those prices trickle down day after day.
don't worry. the fundamentals for collapse are sound.
"From the beginning of 2008, however, monetary expansion has sharply accelerated. In the three months to April 21, the latest data available, MZM expanded at an annual rate of no less than 28.7%"
etc. etc. etc. etc.
that article doesn't prove it, it just talks about the growth in the US Dollar money supply.
if the price of gold downticks from $950 to $850, and you bought at $950, in the long term, it will still have been the right thing to do.
it seemed like someone or some group was working to put a lid on prices. for example, raising the margin requirements (though maybe the banks just decided previous margin requirements were reckless.)
when gold was about $1000, i called a fairly large dealer in Silicon Valley. i have never seen them so busy; people were having to hold for a half hour. i don't think all those calls were from Ben Bernake. _________________ http://www.LasikSOS.com/ ~ Health Warning about LASIK Eye Surgery
Joined: Dec 07, 2005 Posts: 1009 Location: Australia
Posted: Wed May 07, 2008 11:56 pm Post subject: Re: Oil and gold prices plunging
If you still believe CB's will chose deflation over inflation then read this entertaining (and scary) article in safehaven.com
Quote:
The first quarter monetary policy update from Dr. G. Gono, the Governor of the Reserve Bank of Zimbabwe COMMENDS his peers, the world over. Referring to the United States and the United Kingdom.
Quote:
"1.14 Equally also, our thrust has been founded on our unwavering belief that extraordinary circumstances must be confronted through extraordinary interventions and not through half baked or even wholesale 16th century economic dogmas that have been long discarded in their founding countries.
1.15 As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests.
1.16 That is precisely the path that we began over 4 years ago in pursuit of our national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification, and demonization we have endured from across the political divide.
Posted: Thu May 08, 2008 5:14 am Post subject: Re: Oil and gold prices plunging
Not to mention that the Congress is working on a bill that will ensure up to $300 billion in US mortgages. That's not a great amount of money in the long-term given our positions but it sets them up to go out and save everybody that they can in the future which could amount to trillions in printing. _________________ Riches are not from abundance of worldly goods, but from a contented mind.
Joined: Dec 06, 2005 Posts: 768 Location: Stopped at the border.
Posted: Thu May 08, 2008 9:23 am Post subject: Re: Oil and gold prices plunging
Micki wrote:
Quote:
I guess what I was really mad about was being compared to some little blue guy.
If you back up your statements with a bit more analysis or substance to WHY you think a certain move / price target is valid, you shouldn't get the same treatment.
That would at least invite some constructive dialogue.
That kind of stuff is a little too involved for a place like this. I think it is sufficient to say that I believe the cost of production will be the floor and that peak oil has taken that cost up by a certain amount and that labor availablility has taken it up by a certain amount more. So, whereas the cost of production floor might have averaged $300 at the beginning of the current gold bull market I can see those two things adding about $200, which is why I said my estimate was a little high. At $575 an ounce I am actually giving you a high number. That is my bias in this situation, because I do believe in a bull market turnaround which will prevent the kind of total gold collapse which came after the last bull run. If you want more than that then you had better start posting more than pie in the sky estimates about $1500 an ounce without any skepticism attached. Or gold is the only answer without considering what deflation can do to a position loaded unevenly in gold. I have advocated gold, but as part of a diversified portfolio. I doubt everything I say, that is part of personal vetting. If I didn't I wouldn't post it. Nothing is a sure thing. Some things, unthought of or even unlikely, do bear thinking about if only because in the absence thereof there exists the kind of vulnerability that can be very destructive. Yeah, sure I was gloating a little too much about being right, why does that give someone the right to make me out to be a little blue dude? _________________ "Hope encourages men to take risks; men in a strong position may follow her without ruin, if not without loss. But when they stake all that they have to the last coin (for she is a spendthrift), she reveals her real self in the hour of failure."
Joined: Dec 07, 2005 Posts: 1009 Location: Australia
Posted: Thu May 08, 2008 6:57 pm Post subject: Re: Oil and gold prices plunging
Quote:
That kind of stuff is a little too involved for a place like this.
Boy, you just like to take a superior tone and make unsubstantiated claims don't you.
Quote:
I think it is sufficient to say that I believe the cost of production will be the floor and that peak oil has taken that cost up by a certain amount and that labor availablility has taken it up by a certain amount more.
If production costs are the floor you would probably be looking at $600. You are assuming production costs are somewhere round $300 on average for all mines globally which might have applied back in 04-05. Since then there has been runaway increases in energy and labour and equipment costs.
You are also assuming the bull run is over.
Now bull runs can be short, medium or long term.
The type of price crash you have in mind seems to indicate long term.
Technically the long term trend remains, so there is nothing there to support that price target, yet anyway.
Inflation adjusted we are a loooong way from what would be equal top to 1980.
Fundamentally, we have slowing economy and potential recession/depression on one side and on the other side we have inflation/stagflation risks, increasing geopolitical risks, energy supply contraints (which of course could change if demand drops enough), massive short positions built up over years, reallignement of global economies favoring East which has a gold friendlier attitude, counterparty risk (and I think this is an important one as it will support gold in deflationary scenario when derivatives dominoes start. Furthermore historically there is no clear link between deflation and lower gold price). I am sure I still missed some major factors.
Quote:
If you want more than that then you had better start posting more than pie in the sky estimates about $1500 an ounce without any skepticism attached.
You are the one who is categorically saying gold price is heading down and suggesting we should act on your advice even if you treat us like imbecils (i.e. stating That kind of stuff is a little too involved for a place like this. )
Not only that you are saying we are imbecils thinking 1500 is a pie in the sky but you are obviously much smarter than for instance Faber, Schiff, Rogers etc.
Every trader with any experience for instance knows that in the short/medium term anything is possible and you act according to your trading system and/or beliefs. Your attitude of poopooing any potential scenario except your own suggest that you have very limited experience and either 1) just finished of some economics 101 course or 2) subscribed to some "insider secrets - get rich quick" newsletter and are voicing that. opinion
Now in the end of your last post you are trying to save yourself from critizism for previously taken attitude (including the attitude of the same post) and open for possibility of being wrong in your call.
Maybe you should have included similar disclaimers earlier rather than getting red in the face from frustration that noone took your unsubstantiated claims seriously.
I suggest you have a good think about whether you really want to post anything more here because if you thing the topic is a bit "too involved" for this audience, you might be better of to keep the trap shut.
Should you however be willing to actually discuss your opinions, then this forum is the right place. _________________ "make em laugh make em cry make em dance in the aisles
make em pay make em stay make em feel ok" (PinkFloyd)
Joined: Dec 06, 2005 Posts: 768 Location: Stopped at the border.
Posted: Fri May 09, 2008 9:06 am Post subject: Re: Oil and gold prices plunging
Micki,
Maybe you could read that last post before you start criticizing it. I stated that $300 was the floor at the beginning of the last bull run. I reckon my price from there with additions for oil and labor.
You cite inflationary pressures. I agree they seem substantial and auger a long term bull market approach to gold. What you missed so eloquently was my position on deflation. I have said, in other places on this site, that I believe that you cannot have the kind of money supply losses that the credit crunch has wrought without engendering deflation. I see the Fed and the other CBs trying to inflate their way out of it. I don't think that they can. Combine that with high energy costs and the resultant drag on the economy that will bring and there simply is less money to spend on aggregate demand for gold and other non-returning asset classes (no dividends, no eps).
I have always stated my opinion on gold as part of diversification, with the knowledge that I could be wrong. I have been getting more forceful only because the likes of you seem to me to be yelling and screaming about gold going in one direction. I have been telling people that might not happen and maybe gold will go down and what my reasons are. If I don't like to restate my reasons every single time I post my opinion maybe that is my fault. I surely do not see the likes of you on this site restating their reasoning every time I see gold touted as the universal panacea for all things financial.
You have got some nerve suggesting I stop posting. That is uncalled for simply because you don't agree with me. I do not suggest the same for you. _________________ "Hope encourages men to take risks; men in a strong position may follow her without ruin, if not without loss. But when they stake all that they have to the last coin (for she is a spendthrift), she reveals her real self in the hour of failure."
Posted: Fri May 09, 2008 10:41 am Post subject: Re: Oil and gold prices plunging
evilgenius wrote:
Micki,
I have said, in other places on this site, that I believe that you cannot have the kind of money supply losses that the credit crunch has wrought without engendering deflation.
You have got some nerve suggesting I stop posting. That is uncalled for simply because you don't agree with me. I do not suggest the same for you.
There are trillions of yankee bucks circulating outside of the country, looking for a home. Currently much of it is finding it's way into commodities and oil. That's inflationary, it bids up the price, particularly during a supply crunch.
The credit crunch is going to hit items that are credit sensitive, and of limited interest to international investors, like sfh houses. It will have zero tempering effect on inflation in other sectors. The whole tired argument that prices fall to meet what people can afford is just retarded. Tell that to the struggling billions in the world who live in shacks and make 5 bucks a week. Their wealthy neighbours up the street, living in razor wire luxurious compounds, consitute about 1 to 2% of the population, and don't have a problem with the inflation. That's where the US is heading. The "market signal" theory is daft. In an inflationary environment, the market doesn't become deaf, it just tells people without means to f*** off.
Joined: Dec 07, 2005 Posts: 1009 Location: Australia
Posted: Fri May 09, 2008 10:43 am Post subject: Re: Oil and gold prices plunging
I admit I didn't read throught the $300 bit carefully.
On the other hand I did not just cite inflation as being the only bullish factor. And yes, I freqently do tend to repeat reasoning for my position at least to some extent as I don't expect everyone to dig through my old posts. And I certainly don't mind repeating if someone asks.
What I don't get is your arrogant tone and the fact that you seem to contradict yourself.
You say for instance
Quote:
"Go ahead, buy as much gold as you can since you seem to want to lose everything anyway."
and you say that
Quote:
POG $1500 is a pie in the sky
.
First of all I wonder how we are going to lose it all. Are you assuming everyone uses margin and will be forced to sell to cover margin calls?????
Then you go ahead and say;
Quote:
"I reckon that price is somewhere around $575 an ounce. Start to buy in there and keep buying because at those levels there is some kind of floor based on reasonable equilibrium. When the next invasion happens (the Hillary Chronicles) you will be in the perfect position to double, perhaps triple your money."
So if you tripple from $575 you get $1725. Yet you call $1500 a pie in the sky.
If you are just trying to advise that there will be better entry times coming up, then why are you saying we'll lose it all and $1500 is pie in sky?
Then top it off with this funny statement;
"I have always stated my opinion on gold as part of diversification, with the knowledge that I could be wrong. I have been getting more forceful only because the likes of you seem to me to be yelling and screaming about gold going in one direction. I have been telling people that might not happen and maybe gold will go down and what my reasons are. "
So should we be diversified into gold althought we will lose it all?
Then we should we sell it all becasue the bullish scenario MIGHT not happen?
Reasoning for my bullish view on gold has been explained. So far you haven't given much reasoning to why I should abandon this.
And if I sold out, where should I put my money. What is a safehaven as the economy burns? You are saying that US$ is the place to be and that a massive recession/depression is good for US$. (And forget about all the counter party risks that it is sets off as derivaties start setting off.)
Investing and trading is never a certain play. You need to weigh the factors. The scale so far tips in gold (and silvers) favor.
Finally, I did not ask you to stop posting because of disagreement.
It was your arrogant attitude that this was too involved to be discussed with the simple minded posters of PO and we should just go ahead and act on your advice with further debate or quesitoning.
PS, now I got it. You have been reading Mahendra Prophecy, haven't you? _________________ "make em laugh make em cry make em dance in the aisles
make em pay make em stay make em feel ok" (PinkFloyd)
Joined: Dec 06, 2005 Posts: 768 Location: Stopped at the border.
Posted: Fri May 09, 2008 12:23 pm Post subject: Re: Oil and gold prices plunging
No prophecies, no odd econ sites, this thread just caught me a little exasperated at having to explain myself so much. I was getting tired of having to repost my reasoning every time I mentioned deflation when the inflationary crowd rests on their laurels and simply speculates without criticism. Well, that may not be the truth about everyone, but when you feel like you are one of a few that puts out an idea in the face of what amounts to overwhelming criticism it gets old. I rather thought that telling people what I would do and have done might bolster my arguments. I figured that a lot of people like the put your money where your mouth is kind of arguing style. If you don't that's ok.
The fact is some people do sell when they are down. With gold this time around that probably won't be a good idea. Last time this happened, however, it might well have been a good idea based upon the opportunity cost that holding for 10-15 years would have been. Last time the run and bust was not wrapped around the peak, but a pseudo peak brought on by political crisis more than anything else.
If the euro-zone economy begins to falter hard and the dollar is restored it could be, and this is by no means certain, that it will happen again that the price of gold could sink in dollars for a prolonged time. Economies within the euro-zone are potentially facing such a lack of growth that the high rates offered there could make no sense. More that anything it is those high rates and the expectation that they will remain relatively in place that has mostly hacked at the dollar I think. That and the federal spending explosion under the Bush Administration the debt related to which in a way is marked to be sold off to foreigners as a different less safe asset class than US Treasuries via the subprime Fed bundling schemes afoot currently, but that is a whole different topic mostly.
If a significant and prolonged gold price stumble occurs many will be faced with the same difficult decision regarding opportunity costs. Many could choose to sell. If they are diversified they would be protected from having to make that decision for a longer period of time. I think that makes sense.
No, it isn't nonsense to say that less money means less investment, to put it in simple terms. The housing ATM is over. The economy at large is suffering the effects of that. The global economy could be right on the heels of the US economy. Yes, it could be a less severe recession than was first speculated or it could be more severe, who knows? I think that is all the more reason to diversify rather than go all out after a particular asset class. Like I said I do plan on buying back into gold. If it doesn't go down as low as I think it will before it goes up again I will have screwed myself, it's that simple.
Lazy sounds like arrogance because too involved was a reference to having to examine the break even point of the largest miners vs the biggest small players and make assumptions based upon market share and resource stockpiles as well as hedging positions as to whether the line can be held at an average or if there will be consolidation and misery in the mining industry. I don't want to do that for an opinion posting. If you are going to require that from me to back up an opinion you will be waiting a while.
There you are you see, I try hard not to post huge strings like this because I don't really think most people ever read this far. I've done it now. Oh, well. _________________ "Hope encourages men to take risks; men in a strong position may follow her without ruin, if not without loss. But when they stake all that they have to the last coin (for she is a spendthrift), she reveals her real self in the hour of failure."
Joined: Dec 07, 2005 Posts: 1009 Location: Australia
Posted: Fri May 09, 2008 6:47 pm Post subject: Re: Oil and gold prices plunging
OK evilgenius.
Perhaps we both picked up something from this argument and we'll bury the hatchet there. _________________ "make em laugh make em cry make em dance in the aisles
make em pay make em stay make em feel ok" (PinkFloyd)
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